Receiving an inheritance is emotionally significant. Often, clients want to make sure that the property they have inherited will be protected in a property settlement.
When a court is making a decision about property settlement, it is guided by the Family Law Act. The Act provides for a four step process for property settlements, which is as follows:
1. Is it just and equitable for there to be a property settlement?
2. What is the property pool available for distribution?
3. What has each person contributed to the property pool?
4. What are each person's future needs?
Initially, the question of an inheritance first arises at point 2 above: should the inheritance be included in the property pool? The answer to this question depends on several factors, including the timing of the inheritance; if it was received some time after the relationship or marriage ended, an argument could be made that the inheritance should not be included in the joint property pool.
If the inheritance was received prior to or during the relationship, it will very likely be included in the property pool. At that point, the inheritance will become relevant to point 3 above; the party who received the inheritance will be taken to have contributed that inheritance to the property pool and may receive an adjustment of property in his or her favour to account for this.
The inheritance may also be relevant at point 4 above. 'Future needs' covers issues such as the age and state of health of the parties, their capacity for employment, and so on. If the inheritance was received after separation and the court does not think it appropriate to include the inheritance in the property pool, the party who inherited the property may be taken to have a financial resource they can draw on in the future.
If you have received an inheritance and require specialised family law advice about how to protect your interests, contact Swan Family Lawyers on 8221 7020.